worthington industries ir overview · 2019-10-31 · global leader in pressure cylinders industrial...

WORTHINGTON INDUSTRIES IR OVERVIEW

Q4 FY19

DEDICATED TO SHAREHOLDER VALUE

& OUR PHILOSOPHY

INVESTMENT HIGHLIGHTSWe are a market leader in metals related industrial manufacturing

2

We have the tools in place to grow and improve margins

Expanding offerings in higher margin, consumer and industrial

products

Innovation and Transformation 2.0 with LEAN are accelerating success

Advanced price risk management capabilities reduce commodity price

volatility

We are growing via accretive and value enhancing acquisitions

Focus on higher margin engineered products

Experienced acquirers with enhanced due diligence and integration

capabilities

We have a strong capital base, significant liquidity and reward

shareholders

$750mm of long term debt at 4.90% and over $600mm of available

liquidity as of May 31, 2019

Nine consecutive years of dividend increases and 30% share reduction

since FY 2010


& OUR PHILOSOPHY

WORTHINGTON INDUSTRIES OVERVIEWLeading Industrial Manufacturing

3

Domestic leader in flat rolled steel processing

Global leader in pressure cylinders

Industrial Products

Consumer Products

Oil & Gas Equipment

Domestic leader in operator cabs for heavy equipment

Leader in suspension ceiling solutions (WAVE)

Market-leading joint ventures serving construction & automotive end-markets

• Founded in 1955 and headquartered in Columbus, OH

• Publicly traded on the NYSE under the ticker WOR

• 12,000 employees & 5,000 customers; 79 facilities in 11 countries

• Primarily non-union facilities

• Employee, customer, supplier and investor-centered philosophy

• Sales = $3,760 million

• Adj. EBITDA = $330 million

• Free Cash Flow = $113 million

• Net Debt / EBITDA = 2.0x

• Corporate Credit Ratings: BBB / Baa3


& OUR PHILOSOPHY 4

Business Strategy

Operate and grow market leading businesses

Measure and improve the profitability of our businesses via Transformation and LEAN

Acquire higher margin, high value-added manufacturing businesses

Use innovation and new product development to accelerate organic growth

Operating Principals

Clearly communicated business strategies

World class business system designed to maximize operating performance

Use of data, analytics, innovation, and automation to improve our businesses

Technology leader in our industries

Rigorous capital discipline

Financial Goals

Increase margins, free cash flow and earnings consistency

Maintain a strong capital base with modest leverage and ample liquidity

Balanced capital allocation

LEVERAGING OUR CORE COMPETENCY AS A DIVERSIFIED METALS MANUFACTURER


& OUR PHILOSOPHY

WORTHINGTON INDUSTRIES - GLOBAL REACH

5

79 operating locations, 9 joint ventures

Updated May 2019


& OUR PHILOSOPHY

MARKET LEADER IN KEY END MARKETS

6BASED ON FY2019 RESULTS


& OUR PHILOSOPHY 7

Placeholder

for update


& OUR PHILOSOPHY

29%

38%

33%

Steel

Cylinders

**WAVE, Cabs,

and Other JV's

** WAVE = 37%, Other JV’s = 3%, Cabs/Other = (-7%)

36%

18%

16%

11%

5%

4%

3%

7%

Automotive

Construction

Industrial

Consumer Products

Agriculture

Heavy Truck

Oil & Gas Equipment

Other

FY 2019 Q4 NET SALES: $1,122 MILLION (INCLUDING JV OWNERSHIP %)

Operating/Equity Income: $63 million

8

Q4 END-MARKETS NET SALES*

excludes Restructuring and Impairment

* Includes WOR share of unconsolidated JV sales totaling $183 million

Q4 OPERATING/EQUITY INCOME


& OUR PHILOSOPHY

39%

26%

35%

Steel

Cylinders

**WAVE, Cabs,

and Other JV's

** WAVE = 35%, Other JV’s = 6%, Cabs/Other = (-6%)

37%

17%

14%

10%

5%

4%

3%

10%

Automotive

Construction

Industrial

Consumer Products

Agriculture

Heavy Truck

Oil & Gas Equipment

Other

FY 2019 NET SALES: $4.488 MILLION (INCLUDING JV OWNERSHIP %)

Operating/Equity Income(1): $239 million

9

FY 2019 END-MARKETS NET SALES*

excludes Restructuring and Impairment

* Includes WOR share of unconsolidated JV sales totaling $729 million

FY 2019 OPERATING/EQUITY INCOME(1)

(1)FY2019 results were negatively impacted by a $13 million charge in Cylinders

related to a tank replacement program in Q3 which is included in the numbers above.


& OUR PHILOSOPHY

CONSOLIDATED RESULTS

10

*FY2017 excludes pre-tax restructuring charges of $6 million ($0.07/share). FY2018 excludes pre-tax restructuring charges of $54 million

($0.45/share) as well as a one-time benefit of $0.49/share due to the Tax Cuts and Jobs Act. FY2019 excludes a pre-tax restructuring gain of $3

million ($0.01/share).

Note: FY2019 results were negatively impacted by a $13 million charge in Cylinders related to a tank replacement program in Q3 which is

included in the numbers above.

$ millions, except EPS FY2017 FY2018 FY2019

Sales $3,014 $3,582 $3,760

Adjusted EBITDA* $407 $397 $330

% of sales 13.5% 11.1% 8.8%

Operating Income* $220 $195 $142

% of sales 7.3% 5.5% 3.8%

EPS* $3.22 $3.05 $2.60

Avg Invested Capital $1,450 $1,696 $1,628

ROIC (Adj. EBIT/Avg. Inv. Cap.) 22.1% 17.3% 14.4%


& OUR PHILOSOPHY

GROWTH INITIATIVESThree complementary efforts are well established

11

Measure performance and align

incentives to drive:- Data-driven decisions

- Goals that are focused, aligned and

stretched

- LEAN transformation of all businesses

and functions

Short, rapid improvement Lean

events accelerate change- Eliminate waste at root cause

- Best practices & standard work

Leverage Our Strong Culture- Lead with safety & the Golden Rule

- Entrepreneurial innovation

- Profit sharing incentives

New Product Development- Product Design & Engineering

- Customer & Market Research

- Advanced Technologies

- Innovation Strategy

Experienced Leadership- Executives with experience leading

innovation at Procter & Gamble,

Emerson Electric, Bristol Meyer,

Elmer’s Products and Battelle

Memorial Institute

Market Leading Targets- Increase exposure to attractive end

markets

- Target industries/sectors we know

- Enhanced target evaluation process,

due diligence and integration

Focus On The Core- Consolidate markets

- Enhance technology and know-how

- Build out product offering

New Platforms- Enter new lines of business to position

the company for growth


& OUR PHILOSOPHY

TRANSFORMATION 2.0Focused data driven Kaizen events to improve our businesses

12

What we did to drive improvements:

Root cause problem solving to identify best opportunities

for improvement & growth

Improved flow of product thought facility with lean Kaizen

Developed focused product line strategy using Voice of

Customer research to improve margins

Improved collaboration between commercial, supply

chain, purchasing & operations functions

What we achieved:

96% Sustained On-Time Delivery

100% Items At Standard Lead-Time

Overtime Reduced

Productivity Increased

Late Raw Material

Year over Year Gross Margin Increased

Example of Transformation Event at acquired facilityIssue: Low on-time delivery and extended lead times were negatively

impacting customer relationships and ability to sell more product

Pre-Transformation Sustained Improvements

On-Time Delivery %


& OUR PHILOSOPHY

GROWTH THROUGH ACQUISITION

13


& OUR PHILOSOPHY

CAPITAL STRUCTURE & LIQUIDITY

14

$ millions 05/31/2019

Cash $92.4

Undrawn revolving credit facility 500.0

Less: Outstanding LOC (2.0)

Undrawn revolving trade accounts receivable

securitization facility50.0

Total liquidity $640.4

Capital Structure Liquidity

As of 05/31/2019

Final

Maturity $mm

Debt / LTM

EBITDA*

6.50% senior notes 2020 150.0 0.5x

4.60% senior notes 2024 150.0 0.5x

4.55% senior notes 2026 250.0 0.8x

4.30% senior notes 2032 200.0 0.5x

Term loans / Other 3.1 0.0x

Total debt $753.1 2.3x

Cash $92.4

Net debt $660.7 2.0x

*LTM EBITDA of $329.5 million as of 05/31/2019 excluding restructuring

Strong balance sheet with investment grade credit ratings and significant liquidity available to grow business and reward shareholders

Credit Ratings Rating Outlook

S&P BBB Stable

Moody’s Baa3 Stable


& OUR PHILOSOPHY

Over $3.1 billion of capital deployed FY 2009 to FY 2019

($ millions)

Quarterly dividend paid every quarter since

becoming a public company in 1968

Nine consecutive years of dividend increases

BALANCED CAPITAL ALLOCATION STRATEGY

15

Strong cash flows and significant liquidity support balanced approach to capital allocation focused on growth and rewarding shareholders

$690

$999

$471

$977

Capital

Expenditures

Acquisitions Dividends Share

Repurchases

Capital

Expenditures

Acquisitions

Dividends

Share Repurchases


Focus on core businesses and selectively grow

into new markets

Reinvest in the business to create value and

support growth

FY2019 CapEx of $84.5 million

Opportunistic approach has reduced share count

30% since FY 2010

9.0 million shares remaining on current

authorizationGrowth Rewarding Shareholders

*Information based on financials from FY 2009 to FY 2019

STEEL PROCESSING

Q4 FY19


& OUR PHILOSOPHY

STEEL PROCESSING

17

Market Leader

• Galvanized, hot rolled and specialty strip products

• Top 5 purchaser of flat rolled steel in the U.S.

• World class price risk management and hedging

capabilities

• Leader in large program management for OEMs

Growth Strategy

• Transformation 2.0 driving improved operational,

commercial and supply chain efficiency

• Focused on high value add, higher margin markets

• Light weighting opportunities

• Selective acquisitions in high value add niches


& OUR PHILOSOPHY

Examples By End Market

STEEL PROCESSING – SALES BY SEGMENT

18

Sales By Segment

Automotive

59%

Construction

12%Agriculture

9%

Heavy Truck

7%

Other

13%

FY2019 Full Year


& OUR PHILOSOPHY

968 922 8901,040 983 951

840941

Q1

FY2018

Q2

FY2018

Q3

FY2018

Q4

FY2018

Q1

FY2019

Q2

FY2019

Q3

FY2019

Q4

FY2019

Worthington's Steel Processing Volume

STEEL PROCESSING – AUTOMOTIVE INDUSTRY DYNAMICS

19

North American light vehicle production forecast

(vehicles produced in millions)

15.4

16.2

17.0

17.5

17.8

17.117.0

16.6

CY

20

12

CY

20

13

CY

20

14

CY

20

15

CY

20

16

CY

20

17

CY

20

18

CY

20

19

(F

)

Worthington's Steel Processing segment generates over half of its net

sales from the automotive sector

Exposure to Detroit Three as well as "New Domestics”(1)

Working with customers to develop and commercialize innovative

solutions across platforms

Source: IHS Global report, Company filings and WI Auto Production Report.

(1) “New Domestics” denote foreign automotive original equipment manufacturers with domestic production.

4.1 4.3 4.0 4.5 4.1 4.4 3.9 4.4

North American Light Vehicle Production

Volume and automobile production


& OUR PHILOSOPHY

AUTOMOTIVE LIGHTWEIGHTING

20

• Impacting how the supply chains are structured

• Sizable, profitable niches developing

• Differentiating through proven ability to manage complex

programs

• Innovation

Materials:Ultra high strength steel

Press hardened steel

Aluminum

Coatings and lubricants

Methods:Laser welded coils (A)

Laser welded blanks (B)

Hot formed blanks (C)

Curvilinear welded blanks (D)

A

B

C

D

A


& OUR PHILOSOPHY

STEEL PROCESSING - FINANCIALS

21

$ millions FY2017 FY 2018 FY2019

Sales $2,075 $2,253 $2,436

Adj. EBITDA* $200 $177 $122

% of sales* 9.6% 7.9% 5.0%

Operating Income*excl. Restructuring

$172 $143 $93

% of sales 8.3% 6.3% 3.8%

Capital Expenditures $41 $32 $39

Avg Invested Capital $492 $510 $550

ROIC* (Adj. EBIT*/Avg. Inv. Cap.) 31.9% 26.2% 14.8%

Volume (000s tons) 4,070 3,820 3,715

Steel Price (HRC/ton), period average $593 $687 $783

*excludes restructuring and non-recurring charges

Note: results above include estimated FIFO gains / (losses) of $25M in FY17, $18M in FY18, and ($4M) in FY19

PRESSURE CYLINDERS

Q4 FY19


& OUR PHILOSOPHY

PRESSURE CYLINDERS

23

Leading Global Manufacturer

• Pressure cylinders and related products, serving over 4,000

customers in 70 countries

• Highly automated manufacturing with more than 40 years of

experience

• Expertise in highly regulated global markets

• Customers include big box retailers, industrial gas distributors,

transportation OEMs and retrofitters, energy exploration and

production companies

Growth Strategy

• Transformation 2.0 driving improved operational, commercial &

supply chain efficiency

• New product development and brand extension to drive organic

growth and market share gains

• Acquisitions into new higher growth products & markets


& OUR PHILOSOPHY

Q4 Sales: $118.4M

Market-leading brands with products for jobsite, home and outdoor

activities

16oz camping fuel, hand torches and fuel cylinders, and helium kits

PRESSURE CYLINDERSFY 2019 Q4 Sales by Segment

24

Q4 Sales:174.2M

Broad line of pressure cylinders and cryogenic vessels, tanks and

trailers for industrial gas storage and transportation

LPG, refrigerant & specialty gas cylinders

Cryogenic dewars and freezers for life sciences market

Clean vehicle fuel storage and transportation

Q4 Sales: $29.7M

Custom solutions for energy storage, processing and

transportation

Oil & gas well-head separation equipment, automation controls,

and steel storage tanks

Photo courtesy ofSynergy Energy

Fiscal 2019: 9%

Sales: $110.3M

Fiscal 2019: 39%

Sales: $470.4M

Fiscal 2019: 52%

Sales: $627.1M


& OUR PHILOSOPHY

PRESSURE CYLINDERS - FINANCIALS

25

*excludes restructuring and non-recurring charges.

Note: FY2019 results were negatively impacted by a $13 million charge related to a tank replacement program in Q3 which is included in the numbers above.

$ millions FY2017 FY2018 FY2019

Sales $830 $1,206 $1,208

Adj. EBITDA* $92 $127 $105

% of sales* 11.0% 10.6% 8.7%

Operating Income*excl. Restructuring

$58 $80 $63

% of sales 6.9% 6.6% 5.3%



ROIC (Adj. EBIT*/Avg. Inv. Cap.) 9.4% 8.8% 7.2%

Volume (000s units) 71,336 90,174 83,787

ENGINEERED CABS

Q4 FY19


& OUR PHILOSOPHY

Who We Are Today

• Premier structural cab and fabricated component solution provider for select mobile industrial equipment markets

• Diverse customer base that includes both small to large sized equipment manufacturers

• Strategically located in South Dakota, Tennessee, Indiana, & Ohio

• Provide engineering services and multi-year manufacturing based recurring revenue model

Construction

Agriculture

Utility

Forestry

Material Handling

Mining

Rail & Truck

Military

US Cabs Market – Full Assembly

Market Size: $1.7B

CY‘18 Revenue by Segment

ENGINEERED CABS

27

CONSTRUCTION

Compactors, cranes,

excavators, wheel

loaders, heavy-duty

material handlers

FORESTRY

Knuckleboom loaders,

forwarders, tracked /

wheeled feller bunchers

& skidders

MINING

Blast hole drills,

mining trucks, track-

type tractors, motor

graders

WIEC Internal Estimate


& OUR PHILOSOPHY

ENGINEERED CABS - FINANCIALS

28

*excludes restructuring and non-recurring charges

$ millions FY2017 FY2018 FY2019

Sales $101 $117 $116

Adj. EBITDA* ($1) ($6) ($9)

% of sales -1.1% -5.1% -7.7%

Operating Incomeexcl. Restructuring

($6) ($11) ($15)

% of sales - - -



JOINT VENTURES

Q4 FY19


& OUR PHILOSOPHY

SUCCESSFUL JOINT VENTURESServing automotive and construction end markets

30

Business Ownership Created

WAVEArchitectural and acoustical

grid ceilings50% 1992

Serviacero Steel processing in Mexico 50% 2005

ArtiFlexAutomotive tooling and

stamping50% 2011

ClarkDietrichMetal framing for commercial

construction25% 2011

• Successful JV portfolio built with trusted partners

who help make a business better versus the

alternative of going solo

• JVs managed to produce regular cash dividends that

closely approximate earnings


& OUR PHILOSOPHY

WAVE

31

North American leader in suspension ceiling

systems

• Strong brand (Armstrong) and distribution

• Worthington’s steel buying and processing

expertise

• Significant portion of sales to renovation markets

• Over $750 million in dividends paid to Worthington

since FY 2010

Growth Opportunities

• Market growth via Integrated Ceiling Solutions

• Innovation focused on Ceiling Components

• Focused on operational excellence

ARCHITECTURAL SPECIALTIESACOUSTICAL TILE AND GRID AXIOMDRYWALL GRID

Benefits of solution selling

$Opportunity to double

project sales

Saves contractors as much

as 30% in labor

Differentiates contractors

from competition

Architects attain design intent

& integrate more product

WAVE PRODUCT PORTFOLIO INOVA Women’s Hospital, Manassas, VA


& OUR PHILOSOPHY

*Excludes Restructuring and

Impairment Charges

KEY JOINT VENTURE EARNINGSJVs managed to produce regular cash dividends that closely approximate earnings

32

DIVIDEND to WII

(CASH FLOW)

EQUITY EARNINGS*

$ MILLIONS

Equity Earnings

$ MILLIONS

$0

$20

$40

$60

$80

$100

$120

$140

$160

2015 2016 2017 2018 2019

WAVE $70.6 $82.7 $78.3 $77.5 $82.3

ClarkDietrich $2.9 $14.6 $17.3 $9.8 $8.6

Servicero $3.3 $6.3 $7.2 $8.8 $8.1

Artiflex $7.2 $10.3 $7.0 $4.9 $2.0

Other $3.4 $1.1 $0.2 $2.1 $0.1

Total Equity Earnings $87.4

Note: FY19 dividends exclude special dividend from WAVE of $25M, along with $35M of cash proceeds from the international sale of WAVE. FY19 Equity Earnings also exclude a $4.0M impairment for CR Steel China.


& OUR PHILOSOPHY

INVESTMENT HIGHLIGHTSWe are a market leader in metals related industrial manufacturing

33

We have the tools in place to grow and improve margins

Expanding offerings in higher margin, consumer and industrial products

Innovation and Transformation 2.0 with LEAN are accelerating success

Advanced price risk management capabilities reduce commodity price

volatility

We are growing via accretive and value enhancing acquisitions


Experienced acquirers with enhanced due diligence and integration

capabilities

We have a strong capital base, significant liquidity and reward

shareholders

$750mm of long term debt at 4.90% and over $600mm of available

liquidity as of May 31, 2019

Nine consecutive years of dividend increases and 30% share reduction

since FY 2010


& OUR PHILOSOPHY

CONTACT

34

Marcus A. Rogier

Treasurer & Investor Relations Officer

614.840.4663

[email protected]

Safe Harbor Statement

Some of Worthington Industries statements

will be forward-looking statements, which are

based on current expectations. Risk factors

that could cause actual results to differ

materially from these forward-looking

statements can be found in Worthington

Industries’ recent SEC filings.


& OUR PHILOSOPHY

SUPPLEMENTAL DATACash Flow

35

Note: FY2019 results were negatively impacted by a $13 million charge in Cylinders related to a tank replacement program in Q3 which is included in the numbers above.

FY15 FY16 FY17 FY18 FY19

Annual Annual Annual Annual Annual

Net Income 76.8$ 143.7$ 204.5$ 194.8$ 153.5$

Interest Expense 35.8 31.7 29.8 38.7 38.1

Taxes 25.8 59.0 79.2 8.2 43.2

EBIT 138.4$ 234.4$ 313.5$ 241.7$ 234.7$ D&A 85.1 84.7 86.8 103.4 95.6

EBITDA 223.4$ 319.1$ 400.3$ 345.0$ 330.3$ Restructuring and non recurring 104.4 26.7 6.4 52.0 (0.8)

EBITDA Adjusted 327.9$ 345.7$ 406.7$ 397.0$ 329.5$

Stock based compensation 17.9 15.8 14.3 13.8 11.7

Undistributed JV earnings (12.3) (29.5) (8.0) (13.4) 7.3

Interest Expense (35.8) (31.7) (29.8) (38.7) (38.1)

Income taxes (65.7) (51.6) (60.7) (46.5) (25.7)

Net (gain) loss on sale of assets 3.3 (19.9) 8.0 (10.5) (7.1)

Minority interest 10.5 13.9 13.4 6.1 9.8

Change in working capital (20.1) 170.9 (2.0) (35.7) (98.9)

Other (11.2) (0.4) (6.1) 9.3 9.3

Cash Flow from Operations 214.4$ 413.4$ 335.7$ 281.3$ 197.9$

Capital spending (96.3) (97.0) (68.4) (76.1) (84.5)

Free Cash Flow 118.1$ 316.3$ 267.3$ 205.3$ 113.4$


& OUR PHILOSOPHY

$328 $346

$407 $397

$330

9.7%

12.3%

13.5%

11.1%

8.8%

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Adjusted EBITDA* EBITDA Margin

HISTORICAL NET SALES & ADJUSTED EBITDA

36

$3,384

$2,820 $3,014

$3,582 $3,760

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Net Sales ($mm)

Net Sales ($ millions)

Adjusted EBITDA ($ millions)

Excludes restructuring and non-recurring charges.



& OUR PHILOSOPHY

KEY FINANCIAL METRICS

37

$118

$316

$267

$205

$113

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Free Cash Flow

$96 $97

$68 $76

$84

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Capital Expenditures

9.2x10.9x

13.6x

10.3x8.7x

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Adj. EBITDA / Interest Expense

2.0x

1.7x

1.4x

1.9x

2.3x

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Total Debt / Adjusted EBITDA

Free cash flow ($ millions)

Capital expenditure ($ millions)

Adjusted EBITDA* / Interest Expense

Total Debt / Adjusted EBITDA*

Excludes restructuring and non-recurring charges.


worthington industries ir overview · 2019-10-31 · global leader in pressure cylinders industrial...

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